In this opinion granting in part and denying in part a motion to dismiss counterclaims, the Court of Chancery held that the parties to a stock purchase agreement (“SPA”) had contractually agreed to shorten to one year the three-year statutory limitations period otherwise applicable to certain contract claims arising from the SPA. Because none of the counterclaims subject to the motion were filed until after the one-year period had expired, the court dismissed the subset of claims it found to be expressly subject to the truncated time period. The court largely denied the motion as to other contract claims not subject to the one-year period and as to claims asserting fraud in connection with the SPA.

The dispute arose from defendant-counterclaim plaintiff KBR Group Holdings, LLC’s (“KBR”) December 2010 acquisition of Roberts & Shaefer Co. (“R&S”) from plaintiff-counterclaim defendant ENI Holdings, LLC (“ENI”), pursuant to the SPA. The acquisition price was subject to potential adjustments based on R&S’s working capital at the time of closing and any rights to indemnification, with a portion of the purchase proceeds set aside in escrow for these potential adjustments. Significantly, the SPA provided that, except for claims of fraud, the sole and exclusive remedy for all claims relating to KBR’s acquisition of R&S would be indemnification, as set forth and governed by the agreement. The SPA further provided that, while certain “fundamental” and other representations would survive longer, all “non-fundamental” representations would survive for one year after the transaction’s effective closing date and terminate on March 23, 2012 (the “Termination Date”). The SPA required that a party claiming the right to indemnification under the SPA promptly provide the other party with written notice of any facts or circumstances giving rise to a claim for indemnification.

In accordance with the terms of the SPA, KBR provided written notice to ENI for some of its claims before the Termination Date. ENI filed a complaint on December 3, 2012, seeking release of certain funds held in escrow. KBR counterclaimed that ENI committed fraud and breached the indemnification provisions of the SPA by manipulating R&S’s financial condition to inflate the purchase price, continuing to provide or promise payments to employees from an ENI long-term incentive plan after closing, and leaving certain tax matters unresolved after closing.

ENI moved to dismiss, arguing, among other things, that the counterclaims arising from the non-fundamental representations were time-barred. KBR responded that its provision of notice of its claims to ENI before the Termination Date, in accordance with the SPA’s express notice provisions, preserved its counterclaims under the survival clause and satisfied the parties’ intentions as expressed in the SPA. Relying on GRT, Inc. v. Marathon GTF Technology, Ltd., 2011 WL 1348438 (Del. Ch.), the court rejected KBR’s contention, finding that the SPA’s language required that all causes of action based on non-fundamental representations be brought within the one-year survival period, before the Termination Date, notwithstanding the notice provisions also included in the SPA.

The court also rejected KBR’s argument that the limitations period was tolled for certain of the claims arising from non-fundamental representations under the doctrines of equitable tolling, fraudulent concealment, and inherently unknowable injury. The court determined that KBR failed to plead specific facts in support of its equitable tolling and fraudulent concealment contentions. The court also declined to disrupt the contractually negotiated balance of risk to which the parties agreed in the SPA’s survival clause, and in setting the Termination Date, by applying the inherently unknowable injury exception.

The court denied ENI’s motion to dismiss KBR’s counterclaims alleging fraud in connection with non-fundamental representations. In this regard, the court held the SPA to be ambiguous, rejecting ENI’s contention that it clearly barred fraud-based claims after the Termination Date.

Finally, the court dismissed several of the remaining counterclaims, which were based on fundamental representations and covenants, for failure to state a claim. The court denied ENI’s motion with respect to KBR’s counterclaim that ENI breached its representation that the equity interests of R&S and its subsidiaries were not subject to any contractual preemptive rights. Specifically, KBR claimed that the shareholders of a Polish subsidiary of R&S held preemptive rights at the time of closing, constraining R&S’s control over that subsidiary and rendering the subsidiary less valuable. The court also refused to dismiss KBR’s request for rescissory relief, reasoning that rescission is a form of remedy, not a cause of action, requiring a fact-specific inquiry and not best addressed on a motion to dismiss.